FA – May 2014 – L1 – SA – Q18 – Partnership Account

Determines the new profit-sharing ratio after admitting a new partner.

Question

Chuks and Bala are in partnership, sharing profit or loss in the ratio 2:1. If Bode is admitted as a new partner to take one-fifth as his share of profit or loss, while the old partners retain their old ratios, what should be the new profit or loss sharing ratio of the Partners?
A. Chuks = 8/15, Bala = 4/15, Bode = 1/5
B. Chuks = 6/15, Bala = 5/15, Bode = 1/5
C. Chuks = 7/15, Bala = 6/15, Bode = 1/5
D. Chuks = 8/15, Bala = 4/15, Bode = 3/15
E. Chuks = 8/15, Bala = 9/15, Bode = 3/15

Answer

Explanation:
The correct answer is D. When Bode is admitted with a one-fifth share, the remaining share (4/5) is split between Chuks and Bala in the original ratio of 2:1. This results in Chuks’ share being 8/15, Bala’s share being 4/15, and Bode’s share being 3/15.

Tags: Partnership, Profit Sharing, Ratio Calculations
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: MAY 2014

Uploader: Theophilus